JUSTICE DEPARTMENT REQUIRES TWO
WEST VIRGINIA HOSPITALS TO END ILLEGAL
MARKET-ALLOCATION AGREEMENTS

West Virginia Certificate-Of-Need Authority Does Not Shield Agreements
From Federal Antitrust Review

WASHINGTON, D.C. - The Department of Justice announced today that it will
require two hospitals in southern West Virginia--Bluefield Regional Medical
Center, Inc. (BRMC) and Princeton Community Hospital Association, Inc.
(PCH)--to terminate their illegal agreements that allocated cancer services to
PCH and cardiac-surgery services to BRMC. The Department said that requiring
the hospitals to end the agreements is necessary to restore competition and
the options available to consumers when selecting a hospital to provide
medical care.

The Department’s Antitrust Division filed a lawsuit today in the U.S. District
Court for the Southern District of West Virginia, challenging the agreements
between BRMC and PCH as a violation of Section 1 of the Sherman Act. At the
same time, the Department filed a proposed consent decree that, if approved by
the court, would resolve the lawsuit and the Department’s competitive
concerns. A competitive impact statement was filed simultaneously with the
court.

According to the complaint, BRMC, PCH, and St. Luke’s Hospital, a hospital
owned by PCH, are the only general acute-care hospitals in Mercer County, West
Virginia. On January 30, 2003, BRMC and PCH entered into two agreements in
which BRMC agreed not to offer most cancer services and PCH agreed not to
offer cardiac-surgery services in six West Virginia counties and three
Virginia counties. BRMC and PCH subsequently made joint filings with the state
of West Virginia to request certificates of need (CON) for BRMC to provide
cardiac-surgery services and for PCH to provide cancer services. A CON is a
permit required to enter certain areas of the health care market; generally,
the applicant must demonstrate to a state authority that there is an unmet
need for its services. BRMC and PCH had been head-to-head competitors in
cancer services and potential competitors in cardiac-surgery services. The
complaint alleges that the agreements effectively allocated markets for cancer
and cardiac-surgery services and restrained competition to the detriment of
consumers.

“It is essential to maintain competition and choice in this important industry
so that consumers will be provided with the best possible options for their
health care needs,” said J. Bruce McDonald, Deputy Assistant Attorney General
in the Department’s Antitrust Division. “The Sherman Act clearly prohibits
hospitals and other competitors from engaging in this type of market
allocation scheme.”

The state action doctrine provides immunity from federal antitrust liability
where a defendant can show that the challenged restraint is a clearly
articulated state policy and that the state actively supervises the challenged
conduct. As stated in the competitive impact statement, no state action
shields the BRMC-PCH agreements from federal antitrust review. The state
action doctrine does not apply in this case, where state law gives an agency
only limited powers, which in this case the agency did not purport to
exercise, the Department said.

The proposed consent decree annuls the agreements and prohibits BRMC and PCH
from entering into any agreement that allocates any cancer or cardiac-surgery
service, market, territory, or customer. In addition, the proposed consent
decree prevents BRMC and PCH from entering into any agreement that restricts a
health care facility from obtaining a certificate of need relating to cancer
services or cardiac surgery or otherwise restricts a health care facility from
taking actions related to providing cancer services or cardiac surgery without
the prior approval of the United States. Finally, BRMC and PCH are prohibited
from entering into any agreement with each other concerning cancer services or
cardiac surgery without the prior approval of the United States.

As required by the Tunney Act, the proposed consent decree, along with the
Department’s competitive impact statement, will be published in the Federal
Register. Any person may submit written comments concerning the proposed
decree during a 60-day comment period to Mark J. Botti, Chief, Litigation I
Section, Antitrust Division, U.S. Department of Justice, 1401 H Street, N.W.,
Suite 4000, Washington, D.C. 20530. At the conclusion of the 60-day comment
period, the court may enter the consent decree upon a finding that it serves
the public interest.